Sunday, March 30, 2014

it's been a fairly busy week for economic news releases, with the two important reports, the 3rd and final estimate of 4th quarter GDP, and data on Personal Income and Spending for February, coming at the end of the week; earlier we saw several reports on home prices, the Census survey on new home sales, and the report on pending home sales from the NAR, and also March reports on consumer confidence from the Conference Board and Reuters / U Michigan; for manufacturing, the Census released the monthly report on shipments, inventories, and new orders for durable goods, and there were regional reports on manufacturing from the Richmond Fed and Kansas City Fed, as well as a report from the labor department on productivity and costs by manufacturing industry...in addition, the labor dept also released their monthly report on employment and unemployment by state for February, which gives us a more detailed breakdown of the same data we saw in the employment situation reports we saw three weeks ago...

on Monday, we saw the release of the Chicago Fed National Activity Index for February (pdf), a composite of 85 different economic metrics grouped into four broad categories of data: production and income; employment, unemployment, and hours; personal consumption and housing; and sales, orders, and inventories, and constructed such that index values above zero indicate growth above the historical trend, while negative values in the index indicate below trend growth; in February, the Chicago Fed found that 3 out of 4 of the broad categories of indicators that make up the index increased from January, and 2 of the 4 categories were positive, as the index increased to +0.14 in February from –0.45 in January, while the less noisy 3 month moving average decreased to –0.18 from +0.02 in January, its first negative reading in six months...production-related indicators reversed their January weakness, adding 0.26 to the February index, after subtracting 0.38 in January; employment-related indicators subtracted 0.02 from the index, after adding 0.13 in January, while the sales, orders, and inventories category added 0.6% to the index in February after a neutral reading in January, finally, the contribution from the consumption and housing category, which was negative in both months, subtracted 0.16 in February after subtracting 0.19 from the index in January...

on Tuesday, the Census Bureau and HUD released New Home Sales for February, a report that typically has the largest margin of error and is subject to the largest revisions of any census construction series; sales of new single-family houses were reported at a seasonally adjusted annual rate of 440,000 in February, which was 3.3 percent (±17.9%)* below the revised January rate of 455,000, and 1.1 percent (±15.2%)* below the estimate of 445,000 in February last year...again, the asterisk on the numbers in a Census report indicates that due to the small sampling and the possibility of errors, they don't have sufficient data to determine whether new home sales rose or fell in February or over the preceding year...the expression "3.3 percent (±17.9%)" for February indicates that it's 90% likely that at the rate of new home sales for the month, when projected over an entire year, would be in a range between 375,760 and 533,280...similarly, new home sales from a year ago might have been an increased 14.1% or decreased 16.3%; they just don't have enough data to know one way or the other...based on field agents reporting, an estimated 35,000 new homes actually sold in February, up from 33,000 in January; the median new home sales price in February reportedly was $261,800, and the average sales price was $317,500...

January Case-Shiller Home Prices Index Up 13.2% from a Year Earlier

as it was the last week of the month, Tuesday also saw the release of the Case-Shiller home price indexes for January, which indicated that prices received for homes sold over the three month period from November to January slipped 0.1% in the 20 cities covered compared to home prices vis-a-vis the 3 months ending December, but were nonetheless 13.2% higher than the same period last year... 12 of the metro areas saw home prices decline, with Chicago area prices, off by 1.2%, declining the most, while Las Vegas prices, up 1.1, seeing the largest increase...this was the third small monthly decline in the price index in row, typical for this time of year, and we wouldn't be surprised to see next month's index, covering the heart of winter, see a decline as well...the Composite 20 index, which was formulated so that home prices in the 20 metro areas included equaled to 100.00 in 2000, was at 165.50, off 18.7% from the peak of 206.61 set in April of 2006, and up 20.8% from the recent low of 137.05 set in February 2012...

as a result of the recent changes at the St Louis Fed's FRED graphs website, the pair of FRED graphs we created to show the historical track of home prices in each of the cities in the 20 city index can now be viewed interactively, although not on all websites, nor via email; for now, we are including interactive versions of each of those graphs below; you can move your cursor across the graph and view the monthly history of the changes in the price indices for all 20 cities...recall that these indices do not reflect prices, just the difference in price relative to other months on the chart, and relative to the setting of 100.00 that all cities were set at in 2000 when the index was established, which is the start date for both of the charts below... in the first FRED graph, we have the tracks of home price indexes for Atlanta in bright blue, Boston in bright red, Charlotte in dark green, Chicago in orange, Cleveland in purple, Dallas in grey, Detroit in mauve, Denver in mustard, Las Vegas in dull blue, and Los Angeles with the highest price track on this chart in beet red (for the larger interactive view of this graph at FRED, click here)

the second FRED graph shows the the historical price track of each of the metro home price indexes for Miami in bright blue, Minneapolis in bright red, New York in dark green, Phoenix in orange, Portland in violet, San Diego in grey, San Francisco in mauve, Seattle in mustard, Tampa in dull blue and Washington DC in beet red; in addition, this second chart includes the track of the Case-Shiller Composite 20 shown as a heavier black line…again, click here for the larger 1000 pixel interactive version of this graph at the St Louis Fed web site, where all the lines can be easily traced with their interactive tool…

we have recently learned that FRED will discontinue carrying data from S&P, which includes all 179 series of S&P/Case-Shiller Home Price Index data, from which the above graphs were created...we intend to leave these interactive versions of the graphs here above, where they'll viewable until they stop functioning or the data becomes obsolete, after which time they’ll be replaced with still pictures...the interactive FRED graphs have performed differently using different operating systems and browsers, so if you have trouble viewing them, let me know, i'll pass it on to the site developers...

the other widely watched housing market release this week was of the Pending Home Sales Index for February from the National Association of Realtors, which fell 0.8% to 93.9 from a downwardly revised 94.7 in January, the largest drop in 3 years and the 8th month in a row that this index has fallen...this index, which is now 10.5% lower than last February, is based on the level of home sales contract signings during 2001 being equal to 100, and it's drawn from a sample representing roughly 20% of transactions for existing-home sales; home sales are considered pending when the contract is signed but the sale has not yet closed, and this index generally leads existing home sales by a month or two...in terms of the period of home sale closings included in the Case-Shiller home price index for January which we've just reviewed, which includes closings from the beginning of November, then, these pending sales are 3 to 7 months in the future, which puts those delayed prices into a bit of perspective... although the NAR blamed the weakness in this report on the weather, the index for the South was off 9.3% year over year, while the index in the West was 16.5% below a year ago...

on Wednesday, the Census Bureau released the February Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders (pdf), which estimated that the widely watched new orders for manufactured durable goods increased $5.0 billion, or 2.2%, to $229.4 billion in February, after a 1.3% decrease in new orders in January...as is usually the case, new orders for civilian aircraft, which were up 13.6% in February, made all the difference; without the volatile transportation sector, new orders increased just 0.2%...new orders for defense aircraft were also up 21.1%, while the important new orders for nondefense capital goods were off 2.8%....this release also reported that February shipments of durable goods increased 0.9% over January to $234.0 billion, more than reversing the weather related January decline in shipments of 0.6%, while inventories of durable goods increased $3.2 billion or 0.8% to $392.3 billion, a new record high...unfilled orders for manufactured durable goods were also at a new record high in February, as they rose $2.9 billion or 0.3% to $1,062.6 billion...in other manufacturing reports, the Richmond Fed, whose district includes the Virginias, Maryland, the Carolinas, and the District of Columbia, reported that manfacturing in that region continues to contract, as their manufacturing composite came in at a minus 7 in March, slightly worse than February's minus 6, while the Kansas City Fed reports their month-over-month composite index was at 10 in March, up from 4 in February, indicating a greater expansion of manufacturing in their district, which includes western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico..

Fourth Quarter GDP Growth Rate Revised to 2.6%

the 3rd and final estimate of 4th quarter and full year GDP from the Bureau of Economic Analysis indicated that our real total output in goods and services grew at a 2.6% seasonally adjusted annual rate in the 4th quarter and by 1.9% for the full year, ie, from 2012 to 2013...in current dollars, before adjusting for inflation, our 2013 GDP was $16.7997 trillion, up 3.4% from the $16,2446 trillion GDP of 2012...recall that the first or advance GDP estimate had the 4th quarter growth rate at 3.2%, while the 2nd estimate a month ago lowered that to an annualized growth rate of 2.4%...major factors in this revision were larger than previously estimated personal consumption expenditures for services, which were partially offset by markdowns of investment in intellectual property and inventories...exports, imports and government investment and consumption were virtually unchanged from the second estimate...as we review the details, remember that the change in "real" GDP components reported here is not a measure of the change in dollar value of our goods and services, but a measure of the change in our units of output, and thus all percentage changes cited in this report are based on inflation adjusted chained 2009 dollars...also note all the quarterly percentage changes noted herein are at an annual rate, ie, written as if the actual growth in the quarter were extrapolated over an entire year...

the seasonally adjusted 4th quarter growth rate in real personal consumption expenditures at 3.29% actually came in closer to the first estimate of 3.34% than the revised estimated growth rate of 2.6% reported in the 2nd estimate last month; however, consumption of goods in this 3rd estimate were somewhat lower; the entire change in increased PCE came from increased consumption expenditures for services, which grew at a 3.5% annual rate and accounted for 1.57% of the quarterly growth rate in GDP by themselves, which was a major revision of the 2.2% growth rate and an 1.00% addition to GDP reported in the 2nd estimate....more than a third of 4th quarter growth in consumption of services was an increase in spending for health care services, which increased by a seasonally and inflation adjusted $24.4 billion rate in the quarter, while there were also sizable upticks in spending for food services and accommodations and increased outlays for financial services and insurance...spending for durable goods, meanwhile, increased at a 2.8% annual rate, not the 2.5% rate reported last month, and added .21% to GDP while consumption of non-durables was marked down from a 3.5% growth rate to a 2.9% rate and added 0.45% to GDP, as real purchases of food increased at a 3.15% rate in the 4th quarter...

there were also some significant revisions to previously reported figures for the components of 4th quarter real gross private domestic investment....real fixed private investment, which had been reported growing at seasonally adjusted 3.8% annual rate, is now revised to have increased at a 2.8% annual rate, as real investment in non-residential structures is now reported to have contracted at a 1.8% rate rather than the 0.2% growth rate reported last month, and the reported increase in investment in intellectual property was cut from an 8.0% rate to a 4.0% rate; meanwhile, the real increase in investment in equipment has been increased from a 10.6% rate to a 10.9% growth rate, and real residential investment is now seen contracting at a 7.9% annual rate rather than the 8.7% rate of contraction reported in the 2nd estimate...as a result of these revisions, the increase in non-residential fixed investment added .68 percentage points to the 4th quarter GDP growth rate, with equipment accounting for .58% of that, while non-residential structures subtracted .05% and intellectual property added .15%...meanwhile, the contraction in real residential investment subtracted 0.26% from the 4th quarter growth rate, not the 0.29% originally reported...in addition, instead of the increase in private inventories reported in earlier reports, inventories are now seen to have shrunk by an inflation adjusted $4.0 billion and thus subtracted 0.02% from GDP, a marked contrast to the 1.67 percentage points that inventory building added to the 3rd quarter GDP growth rate...thus, real final sales of domestic product, a metric which subtracts the change in unsold private inventories from GDP, increased 2.7% in the 4th quarter, compared with an increase of 2.5% in the 3rd, despite the fact that headline 3rd quarter GDP was up at a 4.1% pace, the strongest growth rate over the past two years...

as we mentioned earlier, there was little change in reported figures for exports and imports...to review, exports add to gross domestic product because they represent that part of our production that is not consumed or added to investment in our country, while imports subtract from GDP because they represent either consumption or investment that was not produced here...in the 4th quarter, real exports of goods and services increased at a 9.5% rate, which was up a tad from the 9.4% rate of increase reported a month ago, while real imports of goods and services increased at a 1.5% rate, same as was reported previously...as a result, the increase in exports added 1.23% to the 4th quarter growth rate, while the increase in imports subtracted .24% from it, making the total impact from an improving trade deficit nearly a point improvement in GDP..

in like manner, there were just minor revisions to the previously reported change in government consumption and investment...as you should recall, the 4th quarter of last year included a partial shutdown of the Federal government during October, hence that sector was a major drag on 4th quarter GDP figures, as real federal government consumption expenditures and gross investment fell at a 12.8% annual rate, which included a reduction in defense spending at a 14.4% rate, which reduced GDP by 0.70%, and a decrease in Federal investment and consumption expenditures at a 10.0% rate, which subtracted 0.29% from 4th quarter growth..since they still add up to a total 1.00% hit to GDP, any change from the 2nd estimate was not statistically significant...meanwhile, consumption and investment outlays by state and local governments is now reported as unchanged in the 4th quarter, and hence had no impact on the change in GDP; that was a minor positive revision from the previously reported decrease at 0.5% rate in state and local outlays..

below we have a screenshot of our regular FRED graph for this report, which has been updated with these latest revisions...each group of seven color coded bars shows the inflation adjusted contribution from each of the major GDP components for each quarter since the beginning of 2011... within each quarterly grouping of seven bars, the quarterly change in real personal consumption expenditures are shown in blue, the change in gross private investment, including structures, equipment and intangibles, are shown in red, the change in imports is shown as a negative in green, the change in exports are shown in purple, the change in private inventories is in yellow, the change in state and local government spending and investment is shown in pink, while the change in Federal government spending and investment is shown in grey...those components of GDP that contracted in a given quarter are shown below the zero line and subtracted from GDP in that quarter, those that are above the line grew during that quarter and added to GDP; the exception to that is imports in green, which subtract from GDP, and which are shown on this chart as a negative, so when imports shrink, they will appear above the line as an addition to GDP, and when they increase, as they have in the recent quarter, they'll appear below the zero line...we have removed the dating from this chart because it was in error, but you can view the accurate quarterly listing of all the data below using the interactive version of this graph at the FRED website...even without that, it's still clear from the chart below that the major contributions to growth in the 4th quarter were personal consumption expenditures in blue and exports in violet, while the Federal government shutdown was the major negative, as lower Federal outlays shown in grey took a whole point off the 4th quarter's growth rate...

February Incomes Rise 0.3% on Government Transfers; Personal Consumption Also up 0.3%

the major monthly release this week, also from the Bureau of Economic Analysis, was on Personal Income and Outlays for February, which in addition to the important personal income data, also reports the monthly data on our personal consumption expenditures (PCE), which as we just saw is the major component of GDP...from that data, the BEA also computes personal savings and the national savings rate, as well as the price index for PCE, which is the inflation gauge the Fed supposedly targets and which is used in this report to adjust both personal income and consumption expenditures for inflation....like the GDP reports, all the dollar amounts referenced by this report are seasonally adjusted and at an annual rate; so the monthly dollar changes, which are not reported, are actually on the order of one twelfth of the reported amounts... however, the percentage changes are expressed as a month over month change and are used within the report as if they refer to the annualized amounts, so it's often been misreported that way...

total personal income increased in February by a seasonally adjusted and annualized $47.7 billion rate to $14,398.8 billion, which was 0.3% higher than in January, when personal income also increased by 0.3%....disposable personal income (DPI), which is income after taxes, increased at an annualized rate of $42.3 billion to $12,706.2 billion, which was also a 0.3% increase over January, while January's DPI was up 0.3% over December, revised from the 0.4% increase reported last month...special factors were again a major factor in the income increases, as wages and salaries only rose at a $13.0 billion annual rate, or less than 0.2% over January... like January, the greatest increase in February incomes was from increases in current transfer receipts from the government to individuals, which added $18.6 billion to February incomes, after an increase of $29.9 billion of transfers in January; by far the largest of those was from expanded Medicaid coverage under Obamacare, which increased at an $11.4 billion rate in February after jumping at a $19.3 billion in January; meanwhile, increases in current transfer payments were partly offset by the loss of expired emergency rations for the unemployed, which reduced transfer payments by an annualized $2.5 billion in February and $16.7 billion in January....other sources of February income increases included incomes of individual business owners, which rose at a $7.7 billion rate in February, a bit less than the $8.0 billion increase in January; $2.0 billion of that was income of farm owners, down a bit from the $2.1 billion income increase they saw in January...in addition, rental income of individuals increased $3.1 billion and income on assets, such as interest and dividends, increased at an annual rate of $2.5 billion...

meanwhile, seasonally adjusted personal consumption expenditures (PCE) rose at an annual rate of $30.8 billion to $11,742.7 billion, 0.3% higher than PCE for January, which was revised down to a $20.0 billion increase over December, from the originally reported $48.1 billion January increase...most of the February spending increase was for services, as outlays for services rose at a $25.6 billion rate to an annualized $7,840.2 billion...spending for durable goods, on the other hand, was down for the 3rd consecutive month, dropping at a $2.3 billion rate in February to $1,250.0 billion, after falling $6.0 billion in January and $33.5 billion in December...meanwhile, spending for non-durable goods rose at a $7.4 billion annual rate to $2,652.4 billion after falling at a $23.6 billion rate in January....

while personal consumption expenditures account for more than two-thirds of our national product, before they can be included in real GDP they must be adjusted for inflation; that's done with the price index for personal consumption expenditures, which is based on chained 2009 prices = 100...that index rose to 108.017 in February from 107.936 in January, a month over month inflation rate of less than 0.1%; thus, inflation adjusted or real personal consumption expenditures rose by 0.2% in January, as did real disposable personal income...the PCE index for durable goods again fell 0.2% after falling every month last year, while the PCE price index for non-durable goods was unchanged for the second month in a row, while the 0.2% increase in the PCE price index for services accounted for the rise in the overall inflation rate...on a annual basis, PCE inflation is now near a 4 year low at 0.87%, far below the 2.50% PCE inflation rate the Fed has allegedly been trying to hit..

by adding interest payments and personal transfer payments to governments to personal consumption expenditures we find total personal outlays were running at an annual rate of $12,161.7 billion in February, an increase of $30.8 billion over January...subtracting that from national disposable personal income at a $12,706.2 billion rate tells us that personal savings grew nationally at a $544.5 billion rate in February, up from $535.9 billion in January...that increase was enough to generate a statistical uptick in the personal savings rate, which is total personal savings as a percentage of disposable personal income, from 4.2% to 4.3%...the screenshot of our FRED graph for this report below shows the monthly personal savings rate in green since January 2007, with the savings rate indicated as a percentage on the right margin of the graph...also shown is real disposable personal income in blue and real personal consumption expenditures in red over the same time frame, with the scale in billions of chained 2009 dollars for both on the left...the recent spike in income and savings you see on that graph was generated by year end tax shenanigans that pulled normal bonuses and dividends back in to December 2012 to avoid fiscal cliff related tax increases; the earlier spikes were as a result of the tax rebates enacted as a fiscal stimulus under George Bush….we have now embedded the interactive version of this graph below, so you can step through the monthly changes in each of those metrics by moving your cursor across the graph...

(the above is the commentary that accompanied my regular sunday morning links emailing, synopses which in turn were mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links that accompanies these commentaries, most from the aforementioned GGO posts, contact me…)

Sunday, March 23, 2014

NOTE: sometime over the past week, the St Louis Fed, home to the FRED graphs, changed their graphs to an interactive format, which apparently necessitated eliminating some of the incompatible options which we've used in creating our graphs, and also left us with about half the differentiating color options we had available and used before the upgrade...as a result, most of the FRED graphs we've included here previously, which were all stored at the FRED site and which we'd always hyperlinked back there, were reformatted, which was an improvement in some cases, and in some cases made them virtually unreadable... however, you can now click the text links we've always used in referring to them to view our graphs as interactives...but since an interactive graph doesn't copy / paste into an email, this post was originally formatted with screenshots of the FRED graphs used, so we’re still experimenting with embedding the interactive graphs…if you see something that dont look right, we’re working on it, try back later...

on Tuesday, the Census Bureau released it's report on New Residential Construction for February (pdf), which you may recall is an inexact survey conducted by Census field agents that gives us a monthly estimate of new housing permits, starts and completions from a small sampling of sites and permit offices accessed....building permits were authorized at a seasonally adjusted annual rate of 1,018,000 housing units in February, which was "7.7 percent (±1.0%) above the revised January rate of 945,000" and "6.9 percent (±1.2%) above" last February's annualized rate of permit issuance....housing starts, which includes apartment units, were at a seasonally adjusted annual rate of 907,000, 2.0% (±12.1%)* below the revised January (annualized ) estimate of 909,000 and 6.4% (±9.9%)* below the February 2013 rate..note the asterisks indicate that Census does not have sufficiently accurate data to determine whether housing starts increased or decreased over the periods cited....based on data extrapolated from field reports, permits for 105,200 housing units were issued in February, 54,200 of which were for single family homes...similarly, the unadjusted monthly data on housing starts indicates an estimate of 62,400 units started, of which 40,100 were single family homes...

Existing Home Sales Slip to 19 Month Low in February

then on Thursday, the National Association of Realtors (NAR) reported on February Existing Home Sales, in which the ongoing slowdown in sales of existing homes was attributed to severe winter weather and higher prices caused by the tight inventory of homes available for sale...seasonally adjusted existing home sales fell 0.4% from an annual rate of 4.62 million in January to 4.60 million in February, a 19 month low, and 7.1% below the 4.95 million-unit annual rate homes were selling at last February...the median home price of homes sold in February was $189,000, 9.1% higher than a year earlier; with a $189,200 median for single family homes and a $187,900 median for condos and co-ops sold, while the average price of single family rose 7.1% to $236,900 and the average prices for co-ops and condos rose 9.4% to $240,400 (pdf source includes regional prices and sales)...it appears that a change in the mix of homes sold is a major factor in the average price increase, as distressed sales selling at a discount, ie, foreclosures and short sales, accounted for 16% of February sales, vis-a-vis 25% a year ago...the effect of this can be seen in the bar graph below, which is taken from an NAR graphics supplement (pdf) which shows that the number of homes selling below $100,000 has declined by 18.0% since last year, while homes selling for between $750,000 and a million and over $1 million have increased by 13.0% and 14.4% respectively over last February...

the Consumer Price Index for for All Urban Consumers (CPI-U) for Febraury indicated modest price changes for most everything except food as seasonally adjusted prices rose 0.1%, and the change in prices overall from a year earlier was just 1.13%...the unadjusted index itself, which is based on prices of 1982 through 1984 equal to 100.0, rose from 233.916 to 234.781...since energy prices were down while food prices were up in February, the core CPI, which is the index for all items except food and energy, was also up 0.1 in February, from 235.367 to 236.075, while the year over year change in core prices was essentially unchanged at 1.62%...

the seasonally adjusted energy index fell 0.5% in February after rising 0.6% in January and 1.6% in December, but was still down 2.5% over the preceding year...despite the fact that fuel oil rose 4.1% for the month, the energy commodities index was down 1.3% because prices for gasoline, which accounts for more than 90% of the index, fell 1.7% and was 8.1% lower than last February...prices for other fuel commodities, ie, propane, kerosene, and firewood rose 10.7% in February and were up 37.5% year over year ...the price index for energy services rose 0.7% on a 3.6% increase for utility gas service while the cost of electricity fell 0.2%; in the year ending February, electricity prices rose 3.8% and natural gas prices rose 8.3%..

the seasonally adjusted food price index rose 0.4% in February as the food at home index rose 0.5% and the food away from home index rose 0.3%, as prices at full service restaurants rose 0.4%, fast food prices rose 0.2%, while meals at work and schools were 0.6% lower; for the year ending February, the food index had increased by 1.5% on a 0.9% uptick in the food at home index and a 2.2% increase in prices for food away from home....higher prices for meats and fruits, typically attributed to drought in California and Texas, were the primary driver of the higher food at home index...the meats, poultry, fish, and eggs index was up 1.2% on beef prices that were 4.0% higher, egg prices that rose 2.2%, and fish and seafood prices that were 0.9% higher than in January; for the year, meat prices rose 3.6%, poultry prices rose 2.5%, and egg prices were 5.7% higher...in addition, the fruit and vegetable index rose 1.1% in February but was still down 0.4% for the 12 month period highlighted here; driving the higher prices in February were a 3.4% increase in both apples and oranges and a 4.0% increase in other fresh fruits, while fresh vegetables fell 0.2% on 3.5% cheaper lettuce, while the processed fruits and vegetable index rose 0.5%...dairy products were also 0.7% higher in February, as cheese and related products were priced 1.6% higher, but the full year increases were less, at 0.6% for the dairy group and just 0.2% for cheese...meanwhile, the index for cereals and bakery products was 0.4% lower in February as breakfast cereals were priced 1.1% lower, the rice, pasta, & cornmeal group fell 0.9%, bread was 0.1% lower while prices for flour and mixes rose 1.6% and cookie prices rose 0.7%...prices for beverages were also modestly lower, by 0.3%, as juices fell 0.2% and roast coffee prices averaged 0.4% lower, while prices in the miscellaneous category of other foods at home rose 0.2% as pickles and relishes rose 2.8%, salad dressings rose 0.4%, peanut butter prices fell 0.5% and soups were priced 1.5% cheaper...on a year over year basis, only 2 food line items showed price changes greater than 10%; lettuce prices fell 20% while oranges were up 12.2% over a year earlier...

excluding food and energy, most of the seasonally adjusted price changes to core CPI components were modest in February, with a 0.2% increase in the major shelter index accounting for half the rise in the core price index, as both rent and owner's equivalent rent rose by 0.2% and lodging away from home rose 0.6%....prices for apparel, on the other hand, were down 0.3% as women's apparel fell 1.3%, women's footware rose 2.1%, men's apparel rose 1.2%, and prices for men's footware fell 0.8%...meanwhile, the index for medical care rose 0.3%. as prices for medical care commodities rose 0.6% on prescription drug prices that were 0.9% higher while prices for personal medical equipment fell 0.4%, and the index for medical care services rose 0.2% as hospital services were 0.6% higher while physician's services fell 0.1%...in addition, the index for transportation commodities not including fuel was unchanged as new cars and trucks prices that were 0.1% higher were offset by used car and truck that were down 0.1% and tire prices that were 0.3% lower, while prices for transportation services were up 0.3% on 0.5% higher car and truck leasing and a 1.2% hike in airline fares, while motor vehicle registration and license fees were unchanged and prices for other intercity transportation fell 1.2%.... also, the recreation price index was up 0.1% as recreation commodities were unchanged as 0.9% lower TV prices and a 4.1% drop in prices for photographic equipment were offset by 1.2% higher prices for audio equipment and toy and bicycle prices that were 0.7% higher, while recreation services rose 0.1% as pet services rose 0.4%, admission to sporting events rose 1.0% and rental of video and audio discs and other media fell 0.8%...and lastly, the education and communication index was also up 0.1% as education and communication commodities fell 0.5% on 2.2% lower prices for telephone hardware and similar consumer information items. while textbooks and school supplies were priced 0.9% higher; then education and communication services were 0.2% higher on 2.4% higher postage and delivery services and 0.7% higher tuition, while prices for telephone services fell 0.4%...on a year over year basis, only two line items among CPI components showed price changes greater than 10%; video disc and similar media services have declined by 11.8%, and televisions are 12.6% cheaper than they were a year earlier...

the screenshot of our new FRED graph below shows the monthly change in each of the major component indexes of the CPI since January 2000, with all of the indexes reset to the beginning of the recession of March 2001; admittedly, that’s odd, but at the present time FRED is refusing to save graphs reformatted to observation dates other than from the beginning and end of a recession (i have already complained)…as you may recall, we’ve formatted CPI graphs similarly in the past in order to compare the price growth of each of these components over time, and because a few of there indexes were created based on 1997 prices = 100 while the rest are 1982-84 prices = 100, we’ve remarked them all to the same date to make for an apples to apples comparison…so in blue, we have the relative track of the price index for food and beverages; in red, we have the reset price index for housing, which includes rent, homeowners equivalent rent, utilities, insurance & everything to do with household operations; in violet, we have the price changes for apparel, which is obviously the only index to show a net price decline over the decade; meanwhile, changes in the volatile transportation price index, in brown, are showing the impact of gas prices on the cost of transportation, while the relative change in the index for medical care in orange has obviously risen the most over the period…next, the price changes for education and communication are tracked in dark green, and our last reset index, in bright green, is for recreation prices...

Industrial Production Up 0.6% in February, Rebounding from January Downturn

for February industrial production, the surprising weakness that was seen when January's data disappointed with a downturn was more than reversed with a 0.6% increase in February, as the Fed's G17 report on Industrial production and Capacity Utilization for the month showed that the seasonally adjusted industrial composite index for all industry, which was set in 2007 equal to 100.0, rose to 101.6 in February from 101.0 in January; although it was occasionally reported that January's change was revised upward to a 0.2% decline, this occurred because the December index was revised down from 101.4 to 101.2; January's index remained unchanged...combining that with a similar revision to November in the opposite direction left the industrial production for all industry 2.8% above it's level of a year earlier...the manufacturing index, which accounts for three-fourths of total production, rose 0.8%, from 96.4 to 97.2, which, when combined with the revision to January, left it at the same level as in December and 1.5% above the year earlier reading...the mining index, which includes gas and oil production, rose 0.3%, from 122.8 to 123.2, bringing its year over year increase to 6.1%....and while the utility index fell 0.2%, from 107.2 in January to 107.0 in February, it was still 3.6 above the December level of 103.4, and 8.3% above a year earlier...since these seasonally adjusted readings for January and February represent utility usage above the seasonal norms, we can expect this index to retreat when temperatures return to a more seasonal level...

in addition to the breakdown of industrial production into its three industry groups, this release also reports on industrial production by market group...among final products and nonindustrial supplies, which accounted for 53.22% of industrial output in 2013, February production of consumer goods rose 0.8% after falling 0.5% in January, as seasonally adjusted production of durable goods rebounded from a 2.7% downturn to a show a 2.1% increase; that was in turn driven by a 4.6% increase in production of automotive products, which were rebounding from a 5.1% pullback in January that was said to be weather related; production of durable appliances, furniture and carpeting, however, fell 1.7% in February after falling 0.4% in January...for the 12 months ending February, durable goods production rose 4.6% on a 6.9% increase in production of automotive products, while home electronics production rose 2.5%, production of appliances, furniture and carpeting rose 4.9%, and production of miscellaneous durable goods rose 1.1% from February 2013 to February this year...production of non-durable goods, meanwhile, rose 0.5% in February after rising 0.1% in January and was 2.0% ahead of last year's output; among non-energy non-durable categories, food and tobacco production rose 1.0% in February after falling 0.7% in January but still remained 1.0% below the year earlier output; clothing production fell 0.7% after falling 0.6% previously but was still 1.2% ahead of last years pace, in addition, output of paper products increased 1.1% in February after falling 1.2% in January and was now off 2.7% in the year ending with this report, while output of chemical products rose 0.9% in February and 2.1% for the year...meanwhile, output of energy, also included in non-durable totals, fell 0.8% in February after rising 2.3% in January and was now 8.4% higher than last February...

production of business equipment rose 1.3% in February after being down three out of the previous four months; production of transit equipment rose by 2.0% after falling 1.6% in January, while production of industrial equipment rose 1.6%, and production of information processing equipment fell 0.1%...since last February, production of business equipment has risen 2.8%, with production of transit equipment up 3.8%, production of industrial equipment up 2.1%, and production of information processing equipment up 2.1% from a year earlier...in addition, production of defense and space equipment rose 0.2% In February, which was 2.6% higher than a year earlier, and production of construction supplies rose 0.2%, but were only up 0.1% year over year, while output of business supplies rose 0.7% and posted a year over year growth rate of 3.1%...both supply indexes remain well below the 2007 level of 100.0 with the construction supply index at 82.9 and the business supply index at 93.7.....meanwhile, production of raw and intermediate materials that would input into other production processes rose 0.4% and were up 3.2% for the year ending February...

as we would expect with a sizable increase in production, the capacity utilization rate for all industry, expressed as the percentage of our plant and equipment that was in use during the month, also rose, from 78.5% in January to 78.8% in February; which is up from our capacity utilization rate of 78.1 in February of 2013...capacity utilization by all manufacturers rose from 75.9% to 76.4%, with the operating rate for NAICS classified durable goods manufacturers at 76.6% and capacity utilization by NAICS classified manufacturers of non-durables at 77.6%…among the durable goods manufactures, both makers of machinery at 82.5% and manufacturers of fabricated metal products at 87.5% saw their operating rates rise by 1.0% in February, while among the non-durable goods manufacturers, the operating rate for the paper products industry rose from 81.2% to 82.0%...meanwhile, capacity utilization by the 'mining' industry slipped 0.1%, from 89.2% to 89.1%, which given their higher production, suggests that oil and gas rig counts probably rose during the month; while the operating rate for utilities fell from 83.5% to 83.3%...

a screenshot of our FRED graph for this report below shows the seasonally adjusted industrial production index for all industry in black, the manufacturing production index in blue, the utility production index in green, and the mining production index in red from the beginning of the index year of 2007, at which time they were all benchmarked to equal 100.0; also shown below is the track of capacity utilization for total industry since 2007 in pink; note that it’s a percentage, rather than an index number like the other metrics we’re tracking on the same graph...

(the above is the commentary that accompanied my regular sunday morning links emailing, synopses which in turn were mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links that accompanies these commentaries, most from the aforementioned GGO posts, contact me…)

Sunday, March 16, 2014

it's been a comparatively slow week for important economic releases, although we did see a couple of reports that are watched for inventory build-up, which is a major component of GDP but which nonetheless is a concern because inventories are goods that have been produced but not yet sold or put to use, such that if they become excessive would lead to a curtailment of further production...on Tuesday, the Census Bureau released data on Wholesale Trade: Sales and Inventories for January, in which they reported that seasonally adjusted wholesale inventories were valued at $521.2 billion at the end of January, which was up 0.6 percent (+/-0.4%) from the revised December level and 3.6 percent (+/-0.9%) higher than last January...this was largely because wholesale sales posted their largest decline in nearly five years, as seasonally adjusted sales of merchant wholesalers fell 1.9 percent (+/-0.5%) to $432.6 billion from revised December wholesale sales, which themselves were revised down $1.4 billion or 0.3%; that decline in turn was mostly in wholesale sales of non-durable goods, which fell 3.2% from December, led by a 7.5% decrease in sales of petroleum and petroleum products; wholesale sales of durable goods were down as well, by 0.4%, but they were still at a level 3.9% higher than last January...the closely watched inventory to sales ratio of merchant wholesalers, while up from December's 1.18 to 1.21 in January, was still not much changed from the 1.20 ratio of a year earlier...

the main report usually watched for inventory buildup is Manufacturing & Trade Inventories & Sales for January (pdf), aka "business inventories", released by the Census Bureau on Thursday, which includes wholesale inventories as a subset of the total...the seasonally adjusted value of manufacturers’ and trade inventories were estimated to be $1,715.1 billion at the end of January, up 0.4 percent (±0.1) from December and up 3.9 percent (±0.6) from last January, as the value of manufacturers inventories rose 0.2% to $637,704 million, retailers inventories rose 0.4% to $556,152 million, and wholesale inventories rose 0.6% to $521,201 million...meanwhile, the seasonally adjusted value of trade sales and manufacturers’ shipments was estimated at $1,302.9 billion in January, down 0.9 percent (±0.2) from December, but up 2.5 percent (±0.4) from last January, as retail sales fell 0.6% to $379,641 million, manufactures shipments fell 0.3% to $490,670 million, and wholesale sales fell 1.9% to $432,555 million....here we find that the total business inventory to sales ratio rose to 1.32 in January from 1.30 in December, which was the highest level for this ratio since late 2009, which you can see in the graph below, which was taken from the pdf report...

the most widely watched economic release of this past week was the Advance Retail Sales Report for February (pdf) from the Census Bureau, which estimated that our seasonally adjusted retail and food services sales for the month totaled $427.2 billion, an increase of 0.3 percent (±0.5%)* from January but now just 1.5 percent (±0.9%) above February a year ago, as year over year sales increases have fallen monthly from 4.1% as recently as November...January's sales were revised down from $427.8 billion to $426.1 billion, a seasonally adjusted 0.6% decline from December, rather than the 0.4% decline we reported on a month ago...December's sales, originally reported at $431.9 billion, a 0.2% increase from November, and then revised to a 0.1% decrease last month, were again revised lower to $428.8 billion, a 0.3% month over month decrease...recall that the Census includes the asterisk on this report when they do not yet have sufficient data to determine whether sales actually rose or not in February, and revisions will also be forthcoming to the "advance" data reported here...the unadjusted data extrapolated from a small sampling of retail outlets estimates that sales actually fell in February to $385,143 million, from $389,880 million in January, which of course was lower than December's revised holiday sales of $485,306...the seasonal adjustment program for February sales account for not only normal seasonal retail sales changes but also account for the fact that there are 3 less days than in January, and generate the adjusted data which Census reports from, and which we'll use for the remainder of this coverage...

we'll start by including below a picture of the table of monthly seasonally adjusted sales percentage changes by business typefrom the Census pdf...note that there are two double columns in that table; the first double column shows us the percentage change in sales for each kind of business from January’s revised figure to this February "advance" report in the first sub-column, and then the year over year percentage sales change since last February in the 2nd column; the second double column set below gives us the revision of January's advance estimates (now called "preliminary") as of this report, with the December to January percentage change under "Dec 2013 revised" and the January to January percentage change as revised in the 2nd column of the pair….the major revisions to January's sales change from December were in clothing store sales, which were originally reported as off 0.9% and are now reported as down 1.8%, sporting goods, book and music stores, which were first reported as down 1.4% and which have now been revised to a sharp 4.8% decline, restaurants and bars, where sales were originally reported as down 0.6% and are now marked as down 1.0%, and sales at electronics and appliance stores, which were reported as up 0.4% in the advance report and which have now been revised to show an increase of 2.6%...(contrast the revised January figures below with the picture of what those January percentages looked like when released last month)...

in a change from recent months, sales of motor vehicle & parts did not make a significant difference in the month over month retail sales change, as they increased by the same percentage that overall sales did....sales at auto & other vehicle dealers rose 0.3% to $72,847 million from $72,653 million in January, bringing the sales for the entire vehicles & parts group to $79,966 million, also up 0.3% from January and up 2.2% from a year earlier despite the 2.3% drop in January...as you can see in the table above, other retail groups that saw sales increases in February included the specialty shops, such as sporting goods, book and music stores, whose sales rebounded from a 4.8% January decline to rise 2.5% to $7,372 million; there was likewise a turnaround in department stores sales, which grew by 0.7% to $14,103 million, after they were down 2.4% in January...however, the broader category of general merchandise store sales still fell 0.3% to $54,455 million in February, after falling 0.4% in January; both are also down year over year; specialty stores sales were 5.2% lower, while general merchandise store sales were off 0.8% from last February...declining sales are also showing up in layoffs for both; as you may recall that retail employment has now fallen two months in a row, with specialty store employment off 8,600 and general merchandise stores showing 6,600 fewer jobs in last week's jobs report...nonstore, or mostly online sales, where employment has been little changed over the past two months, saw sales rise 1.2% to $38,889 million, after falling 1.0% in January...sales at drug stores also rose by 1.2% in February to $24,510 million, after falling by 0.8% in January...in addition, both clothing stores at $20,910 million in sales and furniture stores with February sales of $8,312 million saw 0.4% sales rebounds from January declines of 1.8% and 0.9% respectively...meanwhile, the two major sectors that saw sales declines in February were those that saw sales rise in January; food and beverage store sales were off 0.2% to $55,400 million after rising 0.1% the preceding month, while electronics and appliance store sales also fell 0.2% to $8,303 million after rising 2.6% in January...the latter, however has now seen sales decline 2.4% from last year, which undoubtedly played into the loss of 12,000 jobs at those stores in February alone...

our modified FRED pie graph for retail sales below was created to give us a sense of the relative importance of sales for each of the retail groups covered by this report….starting at the 3 o'clock position and reading counterclockwise, it shows motor vehicles and parts sales at 19.2% of total retail sales as a deep blue wedge, general merchandise stores at 13.1% of retail as a red wedge, followed by food and beverage stores in green at 13.3%, restaurants and bars in mauve at 11.2% of sales, gas stations in orange at 11.0%, non-store or online retailers at 9.3% in sky blue, building materials and garden supply stores in light green at 6.3%, drug stores in mustard at 5.9%, clothing stores in pink at 5.0% of sales, electronics and appliance stores at 2.0% of the total in purple, furniture stores in yellow at 2.0%, and stores specializing in sporting goods, books or music in the pale blue wedge representing 1.8% of retail sales...note that this pie graph does not include the miscellaneous store retailers indicated in the table above, which account for roughly 2.0% of sales, because FRED limited us to a maximum of 12 pie slices per graph...(click to view larger original graph at FRED)

in our next FRED graph below, we’ve used the same color coding to represent each of the 12 major retail sales categories as was used in the pie above and generated a bar graph to show the monthly percentage sales change for each retail group over the year ending February…each month is represented by a grouping of 12 bars, with the percentage change in each type of retail sales represented by its own color code within each bar group, wherein a monthly increase in sales for that business appears above the ‘0’ line and a percentage decrease below it…from left to right in each group is a deep blue bar representing the percentage change in motor vehicles and parts sales, a red bar indicating the change at general merchandise stores, followed by the percentage change at food and beverage stores in green, the sales change restaurants and bars in mauve, the change at gas stations in orange, the change non-store or online retailers in sky blue, the change at building and garden supply stores in light green, the percentage change at drug stores in mustard, the change in sales at clothing stores in pink , the change at electronics and appliance stores in purple, the change at furniture stores in yellow, and the percentage change in sales at stores specializing in sporting goods, books or music in pale blue…(click to enlarge)

on employment, the Bureau of Labor Statistics released the Job Openings and Labor Turnover Survey Summary for January, which, in addition to the data on job openings, gives us monthly hires and job separations by reason, ie, those who were laid off or fired vs those who quit their job...seasonally adjusted job openings rose from 3,914,000 in December to 3,974,000 in January, which is 2.8% as a percentage of total employment, unchanged from December but down from 2.9% in November, in keeping with the poor payroll job additions over those two months....there were 2.6 officially unemployed for every job opening in January, and that was also unchanged, and if you include those who are part time who want a full time job, the ratio is 5.1 workers for each job opening; there were 64,000 additional openings in the health care and social assistance sector, 54,000 more in accommodation and food services, while job openings in professional and business services fell for a second straight month, losing 94,000 openings over the 2 month period...

of the seasonally adjusted January job separations, 2,375,000 quit their jobs, down from 2,417,000 in December, as the quits rate fell from 1.8% to 1.7%, considered an indication that workers aren't confident they could find another job...the number who quit work in retail rose by 37,000, and quitters in accommodation and food services rose by 24,000, while quits in health care fell by 15,000...then another 1,736,000 were either laid off, fired or otherwise discharged in January, up from 1,702,000 in December; as a result, the layoffs and firings rate rose from 1.2% to 1.3%...only unadjusted data is given by industry, so unsurprisingly the largest layoffs shown were in retail…meanwhile, other separations, which includes retirement and death, numbered 341,000 in January, down from 349,000 in December, for an ‘other separations’ rate of 0.2%….our FRED graph for this report below shows monthly hires in orange and monthly separations in violet since January 2007…note that when separations in purple were above orange hires we were losing jobs..of the two major components of separations, layoffs and firings are tracked in red, while the number of those quitting their jobs monthly is shown in green..then in blue, we show the history of monthly job openings over that same time period…

then, in a report released Friday, the Bureau of Labor Statistics reported on the new composite Producer Price Index for February, which now covers selling prices received by producers for finished, intermediate and raw goods, services, and construction sold for personal consumption, capital investment, government purchases, and export.....the seasonally adjusted headline producer price index for final demand fell by 0.1% in February, the first decline in three months, as the index for final demand services fell 0.3% while the index for final demand goods rose 0.4%; core producer prices, which exclude prices for food and energy, fell 0.2%, the most in 9 months, as final demand producer prices for food rose 0.6% as wholesale egg prices rose 19.0% and final demand producer prices for energy rose 0.5%...of core producer prices, textile home furnishings increased by 16.5% while soap and detergent prices were 2.0% lower...on a year over year basis, producer prices for final demand increased just 0.9%, equal to the lowest annual reading of the past year...meanwhile, the producer price index for processed goods for intermediate demand rose 0.7%, the largest increase since a 1.0% increase last February, as prices rose for utility natural gas, diesel fuel, dairy products, plastic resins and LP gas, while wholesale processed poultry prices fell 3.4%; in spite of the February increase, this index shows no price change over a full year...in addition, the price index for unprocessed goods for intermediate demand jumped 5.7%, the most since an 8.1% increase in January 2010, as a 31.5% jump in natural gas prices resulted in a 14.7% increase in the subindex for energy materials and accounted for 60% of the rise in the index, while the index for services for intermediate demand rose 0.2%, largely on a 1.0% increase in transportation and warehousing services...

(the above is the commentary that accompanied my regular sunday morning links emailing, synopses which in turn were mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links that accompanies these commentaries, most from the aforementioned GGO posts, contact me…)

79,000 of the seasonally adjusted jobs added in February were in the broad professional and business services category; of those, 15,700 were added in accounting and bookkeeping services, 29,700 were in other professional and technical services, 24,400 were with temporary help agencies, and 11,400 were in services to buildings and dwellings...of the 25,000 jobs added by leisure and hospitality industries, 21,200 were added by bars and restaurants, an area that has added nearly 305,000 jobs over the preceding 12 months...an additional 33,000 jobs were added in the education and health care services sector, with 18,200 of those in private educational services (not including public schools or state universities)...9,500 jobs were added in health care, of which 8,200 were in doctor's offices, while there were 5,200 more working in social assistance....there was some concern that weather would affect the February jobs count, but like January, another seasonally adjusted 15,000 jobs were added in construction, the one sector usually most impacted by the weather; 12,300 of those were in heavy and civil engineering construction....14,800 more jobs were added in wholesale trade, with 11,500 of those in durable goods trade, while there were 4,100 less jobs in retail, as the 12,000 jobs added by food and beverage stores were more than offset by the cuts of a similar number of employees at electronic and appliance stores and an 8,600 reduction of employees of sporting goods, hobby, book, and music stores....financial activities accounted for another 9,000 new jobs in February, as 9,900 payroll jobs were added by insurance carriers and in related activities...but there were 16,000 less jobs in information, as 14,100 were cut from motion picture and sound recording industries, apparently what passes for information in the US these days....government payrolls increased by 13,000, as increases of 11,000 jobs at the state level, mostly in education, and 8,000 jobs at the local level more than offset the 6,000 payroll jobs lost working for Uncle Sam...meanwhile, employment in manfacturing was mostly flat, with 6,000 jobs added in durable goods industries, while transportation and warehousing saw 3,600 fewer jobs and the resource extraction sector - mining, logging, and oil and gas extraction - netted out just an addition 1,000 jobs...

our FRED bar graph below shows the seasonally adjusted monthly change in payroll employment in selected sectors since the beginning of 2013, with the scale on the left indicating the increase of payroll jobs in thousands when the colored bar for that sector extends upwards, and the decrease in jobs in thousands in that sector when its bar points downwards…in each monthly grouping of 8 bars, the monthly change in manufacturing employment for that month is indicated in blue, the change in monthly construction employment is in red, the monthly change in retail employment is in dark green, the monthly change in government jobs is in yellow, and the change in employment in the large professional and business services sector, which could be anything from an accountant to a trash hauler, is in grey; also included are the CES employment subcategories of jobs in bars and restaurants in light green, and new health care jobs in orange, with private education jobs shown in violet...(download xls jobs data shown in graph - click to show two year graph)...February's jobs changes are represented by the bar cluster on the far right; with the large jump in professional and business service jobs fairly evident, with retail trade as the only sector on our graph showing a job loss for the month, its second larger than normal post holiday employment decrease in a row...

one employment area where the weather may have been a factor was in the average workweek for all payroll employees, which slipped a tenth of an hour to 34.2 hours and is now 0.3 hours less than last February's workweek...construction workers saw 1.2 less hours than a year ago at 38.0 hours for the reference week of the 12th, while the retail workweek slipped 0.1 hour to 31.0 hours, 0.6 hours less than a year earlier...average hours were even lower for production and nonsupervisory employees, who saw their workweek shrink 0.2% below the January level to 33.5 hours...resource extraction was the only sector seeing a much longer workweek in February, as production workers in mining, logging, gas and oil saw their weeks lengthen 0.9 hours to 47.1 hours...meanwhile, average hourly pay for all workers rose 9 cents to $24.31, with utilities workers seeing a 28 cent an hour increase to $35.81 an hour, the highest average pay for any sector, while the lowest paid workers in leisure and hospitality gained 7 cents an hour to average $13.76 an hour... average pay for nonsupervisory workers was also up 9 cents and hour to $20.50, with those working in the information sector seeing the largest increase of 29 cents to $28.77 an hour..

Household Survey Indicates February Unemployment Rose by 223,000

in contrast to the results from the survey of employers, the extrapolated results from the survey of 60,000 representative households indicated that there were 145,266,000 employed in February, a seasonally adjusted increase of just 42,000 more employed individuals than in January, while the number who were classified as unemployed increased by 223,000 to 10,459,000...since the civilian population rose by 170,000 for the month, the combination of the newly employed and unemployed meant 94,000 who were out of the labor force in January returned in February; however, that was not enough to raise the labor force participation rate by a significant digit as it remained unchanged at 63.0%...similarly, the small increase in the employed vis-a-vis the population was not enough to lower the employed to population ratio by a significant factor as it also remained unchanged at 58.8%...our adjacent FRED graph shows the historical track of these two metrics over the past ten years, with the labor force participation rate shown in red and the employment to population ratio in blue...some at the Fed think that big downturn in both since the recession is normal, as it's just the boomers retiring en masse..

with the relatively large increase in the unemployed compared to the 264,000 increase in the labor force, the unemployment rate, which is the percentage of the labor force unemployed, rose a tenth of a percent to 6.7%...statistically, the BLS considers that "little changed", since the margin of error in in the unemployment rate is +/- 0.2%, while the margin of error in the number unemployed is +/- 300,000....thus they report the unemployment rates for the major demographic groups -- adult men at 6.4%, adult women at 5.9%, teenagers at 21.4% whites at 5.8%, blacks at 12.0%, and Hispanics at 8.1% -- as "little changed" in February; however, the data shows that the unemployment rate for black men rose from 12.0% in January to 12.9% in February, while the unemployment rate for black women fell from 10.4% to 9.9%...remember, only those who looked for work during the month are counted as unemployed in this report...meanwhile, the number who reported that they were working part time who indicated they wanted full time work fell by 71,000 to 7,186,000; so the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", fell from 12.7% in January to 12.6% in February, another post recession low...

and remember, these counts of the long term unemployed doesn't even count those who did not happen to search for work during February, or in the reference month in the case of the months charted...among those of us thus not officially in the labor force and hence not counted, some 6,091,000 reported that they still want a job...of those, 2,303,000 were categorized as "marginally attached to the labor force" because they had looked for work sometime during the last year, but not during the 30 day period covered by the February survey...775,000 of those were further characterized as "discouraged workers', because they say that they haven't looked for work because they believe there are no jobs available to them...

January Incomes Rise 0.3% on Government Payments while Spending Rises 0.4%

another important release of this past week was on Personal Income and Outlays for January from the BEA (Bureau of Economic Analysis), which, in addition to giving us the details on our personal income and disposable personal income (after taxes), also reveals the details on our personal consumption expenditures (PCE), the major component of GDP, personal savings and the national savings rate, as well as the price index for PCE, which is the inflation gauge the Fed targets and which is used in this report to adjust both personal income and consumption expenditures for inflation...like all data from the BEA, the dollar totals and the month over month dollar amount changes for each of these metrics are given at a seasonally adjusted annual rate, but the percentage change is expressed as a month over month change...with this report, income figures for July through September have been revised with new data from the Quarterly Census of Employment and Wages, another government program that will be curtailed due to budget cuts...

In January, total personal income increased by a seasonally adjusted and annualized $43.9 billion to $14,356.1 billion, which was 0.3% higher than in greater than December, when personal income decreased at a $5.5 billion annual rate from November, which would be considered statistically unchanged...disposable personal income (DPI), which is income after taxes, increased at an annualized rate of $45.2 billion to $12,667.3 billion, which was a 0.4% increase over December, when DPI fell by an annualized $9.7 billion, a 0.1% drop...most of the January increase in income and DPI was not from what most would consider traditional sources; $29.8 billion of the $43.9 billion increase in income was from increases in current transfer receipts from the government to individuals; $14.2 billion of those income increases came from the 1.5% cost of living increases seen in social security stipends and several other federal pension programs, another $19.2 billion was attributed to the increase in Medicaid benefits due to expanded coverage under Obamacare, and $14.7 billion reflected increases in several refundable tax credits, including health insurance premium subsidies in the form of tax credits to those who enrolled in Obamacare exchanges...offsetting those increases in government transfer program incomes was the $16.7 billion hit to incomes of the long term unemployed due to the expiration of emergency unemployment rations, and a reversal of lump-sum social security benefit payments that had boosted December personal incomes at a $8.2 billion annual rate...

meanwhile, wages and salaries increased at an annual rate of $14.8 billion in January, after falling at a $9.1 billion clip in December... an increase in government wages and salaries added $0.6 billion to that, compared to the $1.3 billion government payrolls added in December...other income increases to employees in January were in the form of a $1.9 billion annualized increase in employer contributions for employee pension and insurance funds, and a $2.7 billion increase in employer's contributions for government social insurance, largely due to the once a year increase in the social security taxable wage base...in addition, proprietors' income increased $4.4 billion for the month, in contrast to a decrease of $6.1 billion in December, mostly because the $12.6 billion seasonally adjusted decline in farm owners income that was seen in both November and December stabilized, as they saw their incomes rise at a $0.6 billion annual rate in January...rental income to individuals also increased at a $5.6 billion rate, after an increase at a $2.4 billion rate in December, while personal interest and dividends decreased at a $6.7 billion rate in January...

on the spending side, seasonally adjusted personal consumption expenditures (PCE) rose at an annual rate of $48.1 billion to $11,712.1 billion, a 0.4% increase...that increase was driven by a $71.6 billion increase to $7,799.0 billion annualized in spending for services, mostly due to greater than normal utility outlays and increased health care spending...spending for goods, on the other hand, fell at $23.4 billion rate, not surprising considering the 0.4% drop in January retail sales....durable goods spending was off at a $4.4 billion clip to an annualized $1,253.5 billion, while outlays for non-durable goods fell at a $19.0 billion annual rate to $2,659.7 billion...

while personal consumption expenditures are more than two-thirds of GDP, before they're included in that computation they must be adjusted for inflation using the PCE price indices, which are based on prices in 2009 equal to 100.0...in January, the PCE index for durable goods fell another 0.1% after falling every month last year, while the PCE price index for non-durable goods was unchanged, and the PCE price index for services rose 0.2%; as a result, real personal consumption expenditures rose by 0.3% in January, after falling 0.1% in December, and increased by 2.2% on a year over year basis...adjusting disposable personal income with the same PCE price index, we find that real inflation adjusted DPI rose by 0.3% in January and 2.7% from a year earlier, but was still down 2.5% from December 2012, when when accelerated bonuses and special dividends related to fiscal cliff tax avoidance schemes caused a one time spike in DPI...

to compute how much of our national DPI was saved, we find that total personal outlays, which includes interest payments, and personal transfer payments in addition to PCE, increased by an annualized $49.7 billion to $12,127.3 billion in January, and we subtract that from our disposable personal income of $12,667.3 billion and find that total savings was $540.1 billion for the month....thus the personal saving rate, which is personal saving as a percentage of disposable personal income, was 4.3% in January, unchanged from December....our FRED graph below shows the monthly personal savings rate in green since January 2007, with the savings rate indicated as a percentage on the right margin of the graph...also shown is real disposable personal income in blue and real personal consumption expenditures in red over the same time frame, with the scale in billions of chained 2009 dollars for both on the left...note that although both appear to be rising at a decent clip, neither is adjusted for increases in the population…

Foreclosure Starts at a Crisis Low as January Mortgage Delinquencies Fall a Seasonal 2.96%

we're also going to review the Mortgage Monitor for January (pdf) from Black Knight Financial Services (formerly LPS Data & Analytics), mostly by pulling charts from the largely graphic report and discussing their implications...the focus of this month's report was that new mortgage loan originations declined to their lowest since November of 2008 and that the number of homeowners who remained eligible for either traditional and HARP-eligible borrower refinancing continued to decline, and while there are several charts in the Mortgage Monitor illustrating these trends, we'll continue to to focus on mortgage delinquencies and foreclosure data from this report as we have in the past...as of January, BKFS reports that 1,175,500 home mortgages, or 2.35% of all mortgages outstanding, remained in the foreclosure process, which was down from 1,244,000, or 2.48% of all active loans in December and down from 3.41% in January of last year....these are homeowners who had a foreclosure notice served but whose homes had not yet been seized, and January's was the lowest percentage of homes in foreclosure since 2008...in addition to homes in foreclosure, end of January data showed that 3,140,000​ mortgage loans, or 6.27% of all mortgages, were at least one mortgage payment overdue but not in foreclosure, down from 3,244,000 homeowners, or 6.47% of those with a mortgage, who were more than 30 days behind in December...of those who were delinquent in January, 1,289,000 home owners were seriously delinquent, which means they were 90 or more days behind on mortgage payments, but not in foreclosure at the end of the month..thus, with 8.82% of homeowners with a mortgage who were either late in paying or in foreclosure, 4.92% of them remained in serious trouble at the end January...

the first graph below, from page 25 of the Mortgage Monitor pdf, shows the percentage of active home loans that were delinquent monthly since 1995 in red and the percentage of mortgages that had been in the foreclosure process in green monthly over the same period…it’s pretty clear that the percentage of homes in foreclosure in green has been falling fairly steadily over the last year and a half and at 2.35% is now down 45% from the October 2011 peak of 4.29% of mortgages in the foreclosure process…but we're still around 5 times the pre-crisis foreclosure inventory of 0.44% from December 2005 that’s highlighted on the graph, so we’re still a long way from normal …similarly, with delinquent mortgages shown in red at 6.27% of all mortgage outstanding in January, we’re down nearly 40% from the 10.57% of mortgages that were delinquent but not in foreclosure in January of 2010, but still nearly 50% above the December 2005 delinquency percentage of 4.27% noted on the graph...the seasonality of mortgage delinquencies is also apparent in the track of the red graph, wherein they usually begin to increase at the end of the summer and peak during the holidays, and then decline at the beginning of the year as homeowners catch up after holiday shopping...we wouldn't be surprised if that decline in delinquencies is delayed this year as homeowners are confronted with larger than normal heating bills...

the next graph, from page 22 of the pdf, shows the number of new foreclosure starts monthly since January 2008 in blue, as indicated by the numbers on the left margin, and those new foreclosure starts as a percentage of seriously delinquent mortgages in red, with the percentage scale for those on the right....foreclosure starts, which have been trending lower, fell to 94,075 during January, which is the first time they've been below 100K since 2006...and since serious delinquencies remain elevated, foreclosure starts as a percentage of those homeowners who are more than 90 days late on their mortgage payments is now at an all time low...

the next combination bar graph, from page 20 of the Mortgage Monitor, gives us another perspective on these foreclosure starts...each bar represents the number of foreclosure starts that took place in each month since January 2008; the blue portions of each bar represents those home mortgages that were entering foreclosure for the first time, and the red portion of each bar represents those who are again being served with foreclosure notice after a previous cure, typically through a modification...the green line shows the percentage of foreclosure starts monthly that were repeat foreclosures, which we can see has been over 40% for the past year and a half...it's fairly apparent that a significant number who have once escaped foreclosure, either through a modification or by catching up on payments, are still falling behind enough to have the process restarted on their homes...

the next graph below, from page 21 of the pdf, gives us even more perspective on these foreclosure starts...each line shows the number of months that the homeowner was delinquent when the foreclosure was first initiated since 2005, with the number foreclosed in the given delinquency bracket on the left margin...in dark blue, we have the number of homes that were 6 months overdue when foreclosure was started, in orange we have the number 5 months delinquent when foreclosure was initiated, in teal blue, foreclosure starts in the 4 month bracket, while the 3 month delinquency bracket is in violet and the 2 month delinquents are in red...note that the drop in foreclosure starts primary is in the 2 and 3 month delinquent brackets...BKFS, in association with the servicers, blames this drop in foreclosures on new rules from the Consumer Financial Protection Bureau...

this next graph, from page 23 of the Mortgage Monitor, has two bars for each month since the beginning of 2008...the number of foreclosure starts monthly is shown by the blue bar, while the number of delinquent mortgages that deteriorated to serious, ie, first became more than 90 days late, is shown in red for each month...while the blue line on the graph is showing that the ratio of serious deterioration to foreclosure starts is at the highest level since 2010, BKFS is pulling a bit of a misdirection here, because the graph by no means implies an increase in more mortgages becoming delinquent...the number of seriously delinquent mortgages fell over most of the period and has remained in the same narrow range over the past 5 months, while the number of foreclosure starts has dropped monthly since October, raising the ratio...

in this next graph, from page 24 of the Mortgage Monitor, we see that completed sales as a percentage of those homes in foreclosure jumped in January, which according to BKFS, was simply a matter of return to a normal pace after a holiday moratorium…foreclosure sales is a industry euphemism for those mortgages that have proceeded through the last legal step in that month, which is typically an auction that transfers the home into the bank REO (real estate owned) portfolio (a glossary is on page 31)…the blue graph shows that the percentage of foreclosure sales completed on homes in judicial states, where the banks must establish their right to foreclose in court, rose 28.73% in January to 3.51% of those homes in foreclosure, while the red graph shows that the percentage of homes in non-judicial states, where foreclosures tend to proceed more rapidly, rose 12.65% to 7.7% of all homes in the foreclosure inventory of those states..

(the above is the commentary that accompanied my regular sunday morning links emailing, synopses which in turn were mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links that accompanies these commentaries, most taken from the aforementioned GGO posts, contact me…)

note on the graphs used here

in March a year ago the St Louis Fed, home to the FRED graphs, changed their graphs to an interactive format, which apparently necessitated eliminating some of the incompatible options which we had used in creating our static graphs before then...as a result, many of the FRED graphs we've included on this website previous to that date, all of which were all created and stored at the FRED site and which we'd always hyperlinked back there, were reformatted, which in many cases changed our bar graphs to line graphs, and some cases rendered them unreadable... however, you can still click the text links we've always used in referring to them to view versions of our graphs as interactive graphs on the FRED site, or in the case where an older graph has gone missing, click on the blank space where it had been in order to view it in the new format....